27 October 2017 On 26 October 2017 the ECB’s Governing Council announced changes to its Asset Purchase Programme (APP). This was largely in line with consensus expectations of an extension of purchases, at a reduced rate, and with a shift in emphasis towards forward guidance. However, this is likely to have implications with respect to market efficiency and liquidity, impacting the sovereign, credit, covered bond, and repo markets, and so the core of ICMA’s work and focus.

The key changes to the APP are:

The APP is to be extended by 9 months to September 2018.

Rate of purchases to be reduced from €60bn to €30bn per month.

Programme to remain ‘open ended’, giving the GC room to increase the rate of purchases or to extend beyond Sep 2018, if they feel it necessary

Any rate rises will come ‘well after’ the programme ends (pointing well into 2019).

If the APP continues as scheduled, the ECB will hold around €2.5tn of assets by its conclusion this time next year: around a third of the Euro areas public debt.

No details were given with respect to the composition of the purchases, however additional information on the ECB website states: The Eurosystem anticipates that the purchase volumes under the three private sector purchase programmes (the ABSPP, the CBPP3 and the CSPP) will remain sizeable. This would suggest a relative shift from public to private assets, and, most likely, the emphasis being on the Corporate Sector Purchase Programme.

The ECB will also begin publishing monthly redemption amounts for the 4 APP components in anticipation of an increase in redemptions in 2018 (providing more transparency around its reinvestment schedule).

The APP, in particular the CSPP and PSPP components, will continue to have major impacts on ICMA’s focus areas, and the intersection of monetary policy and market regulation will remain a high priority of the ICMA Secondary Market Practices Committee (SMPC), European Repo and Collateral Council (ERCC), as well as other key fora and working groups, particularly to the extent that it affects market functioning and efficiency.